Aug. 25 (Bloomberg) -- Central bankers from Japan and the
U.K. predicted their new campaigns to encourage expansion will
work, sustaining support for global growth even as the Federal
Reserve considers a reduction in stimulus.

As the annual gathering of central bankers and economists
in Jackson Hole, Wyoming, drew to a close yesterday, Bank of
Japan Governor Haruhiko Kuroda said his souped-up asset-buying
“has started to exert effects” on the world’s third-largest
economy.

Bank of England Deputy Governor Charlie Bean said the
U.K.’s pledge this month to avoid raising interest rates before
unemployment falls to 7 percent should restrain U.K. gilt yields
and boost confidence among consumers and companies.

“We don’t think that all central banks will phase out from
unconventional monetary policies,” International Monetary Fund
Managing Director Christine Lagarde told Bloomberg Television’s
Sara Eisen. “In Europe and Japan there is a lot more to be
done.”

Such sentiments may help offset concerns among emerging
markets as Fed officials consider whether to start reducing
their $85 billion in monthly bond buying as soon as next month.
Buffeted by a recent sell-off in emerging-market stocks and
currencies, officials from developing nations, including
Mexico’s central bank governor Agustin Carstens, cautioned the
symposium about unintended harm from advanced nations’ monetary
policies.

ECB Rate

The European Central Bank cannot “rule out” cutting its
benchmark interest rate to a new record low even amid signs the
euro-area economy is on the mend, said Governing Council member
Panicos Demetriades.

“That option is still on the cards,” he said in an
interview. “We cannot rule out that possibility although one
has to take a look at the new data. That data is more
encouraging.”

Emerging-market stocks have lost more than $1 trillion in
market value since May, when Chairman Ben S. Bernanke testified
to Congress that the Fed “could take a step down” in its bond
purchases, according to data compiled by Bloomberg. Such buying
helped channel $3.9 trillion in capital flows to developing
nations in the past four years.

The MSCI Emerging Markets Index has fallen 12 percent this
year, compared with a 13 percent gain for MSCI’s gauge of shares
in advanced economies. The 20 most-traded currencies among
emerging economies have fallen about 4.3 percent in the past
three months, data compiled by Bloomberg show.

BOJ Purchases

Japan’s central bank is buying more than 7 trillion yen
($70.9 billion) in bonds each month to expand the monetary base
by 60 trillion yen to 70 trillion yen per year. It seeks to
generate inflation of 2 percent within two years after 15 years
of battling deflationary forces.

Kuroda said the push has helped boost stock prices and
restrain bond yields, while supporting bank lending and
bolstering confidence among consumers and businesses. Inflation
expectations are also picking up, he said.

“We think that at least in the next two years or so we
would be able to contain increases in long-term interest rates,
so as to maintain low real interest rates,” he said.

Consumer prices rose in June, and the world’s third-biggest
economy expanded at an annualized 2.6 percent in the three
months through June 30. The benchmark Nikkei 225 Stock Average
is up 31 percent this year.

Japan will maintain the strategy “while continuing to make
efforts to maintain the stability of the global financial
system,” Kuroda said.

Forward Guidance

Meantime, the Bank of England this month embraced so-called
forward guidance by projecting it will keep its benchmark
interest rate at 0.5 percent until late 2016 as it waits for the
jobless rate to fall from 7.8 percent.

While a run of strengthening economic data has helped push
up gilt yields since then, Bean said in Jackson Hole that the
unemployment threshold, by serving as a reminder of just how
much growth is needed to regain lost ground, should temper the
extent of any tightening.

“The knowledge that monetary policy will not be tightened
until the U.K.’s fledgling recovery is secured should boost
confidence,” Bean said. “Moreover, it should reduce the
likelihood that the present expansionary monetary stance is
withdrawn prematurely through an upward movement in market
interest rates.”

Still, Bean told the audience the BOE’s main aim is to
clarify what it takes into account when setting policy rather
than pledging to keep rates lower than would be appropirate to
inject extra stimulus.

Pushing Back

Bean yesterday pushed back against Aug. 23 comments by
Carstens and the IMF’s Lagarde that policy makers in advanced
nations should do more to coordinate monetary policies.

Although central banks should try to communicate their
strategies, it was not “viable” for them to take account of
spillovers on other economies in their decision-making, he said.

The Fed found support from Luiz Awazu Pereira, deputy
governor of Brazil’s central bank, who said slowing stimulus
from the Fed should be “positive” for his country because it
would show the U.S. economy is gaining strength. Brazil this
week sought to stem the world’s worst currency decline by
announcing a $60 billion intervention program involving swaps
and loans to prop up the real after it fell to a four-year low.

“For us, the exit from unconventional monetary policy was
perhaps a long-awaited predictable process,” Awazu said. “The
puzzle is why is it with all this careful preparation things got
a little bit out of hand.”

Lagarde said in the Bloomberg Television interview that
“clarity of when things will happen, how things will happen”
is needed as the Fed considers unwinding its bond-buying program
in order to minimize the impact on financial markets and the
effect on emerging markets.